HDFC Bank sacks 3 senior executives in Credit Suisse AT1 bond scam. These officials of the Dubai branch are accused of selling bonds by misleading customers. After this, there is a ban on adding new customers to banks in Dubai.
Mumbai : HDFC, the country’s largest private bank, has taken strict action in a big scam case. The bank has fired three of its senior executives due to irregularities in the sale of AT1 bonds of Credit Suisse. This decision was taken after the internal investigation of the bank. The fired executives include Sampat Kumar, group head of branch banking division, Harsh Gupta, executive vice president (Middle East, Africa and NRI business) and Payal Mandhayan, senior vice president. Harsh Gupta and Payal Mandhyayan were suspended in January last year till the investigation report of this investment fraud in Dubai branch came.
What did bank sources tell?
A senior official of the bank, on condition of anonymity, informed, “Whatever happened there, happened under the supervision of Sampat Kumar. Even though he was not directly involved in the fraud, his negligence is clearly visible. Whereas, Harsh and Payal were actively involved in this fraud.”
How did the fraud happen?
Buyers of AT-1 bonds, mostly NRIs, have made serious allegations against bank officials. He says the authorities misled him and asked him to transfer his Foreign Currency Non-Resident (FCNR) deposits held in India to Bahrain. “We were sold bonds at the Bahrain branch under the pretext that they were of fixed maturity and would yield guaranteed returns. We were also made to sign blank papers,” said a bond holder.
Actually, Credit Suisse’s AT-1 bonds were perpetual bonds, that is, which have no maturity date. But the bank officials sold them to the customers by calling them ‘fixed maturity’.
What is the crisis of Credit Suisse?
As part of the rescue package to save Credit Suisse, approximately $20 billion of AT-1 bonds were initially written off (i.e. their value was reduced to zero). However, the Swiss Federal Administrative Court later declared the move ‘illegal’. Currently, FINMA (the Swiss regulator) and UBS (which bought Credit Suisse) have appealed to the Supreme Court against this decision. After this entire incident, Dubai Financial Services Authority (DFSA) has banned the Dubai branch of HDFC Bank from adding new customers. However, the authority has not given any official statement on this.